WALTERS: A new front in pension war

November 23, 2012, 8:51PM

11/23/2012

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The public employee pension reform plan enacted by the Legislature and Gov. Jerry Brown this year was minimalism. They did just enough to say that they did something, believing that failure to do something about soaring pension costs would adversely affect Proposition 30, the tax increase measure that they wanted voters to enact.

Brown, et al., promised that it was merely a first step and that other reforms would follow, but with Proposition 30 now safely passed, the chances of any further state pension changes probably are scant.

In fact, while state pension costs have been increasing, they still represent a relatively small part of the state budget, because personnel costs are a relatively small part of the budget. Most of the state's money is given to others — schools, colleges and counties, particularly — to be spent.

Proportionately, rising pension costs hit city governments the hardest, because their budgets are primarily spent on employees, especially police and fire personnel, who have the highest pensions of any California public workers.

That's why the bankruptcy cases of two cities, Stockton and San Bernardino, have become major pension battlegrounds. Insurers of Stockton's bonds have demanded that the city's pensioners share the pain of any write-down in the city's debts, while San Bernardino has suspended its payments to the California Public Employees' Retirement System.

CalPERS is taking an aggressive legal posture in both cases to protect what it contends to be an inviolable obligation to finance pensions, regardless of what happens to other creditors, but whether federal bankruptcy law can trump state pension law is an unsettled legal question.

As those cases play out, another front in California's pension war has opened in the state's largest city, Los Angeles, which has serious budget problems stemming, in part, from its massive pension obligations — so serious, in fact, that some city officials have raised the specter of following Stockton and San Bernardino into bankruptcy court.

Facing a $216 million budget deficit next year, the Los Angeles City Council has voted to place a $215 million sales tax increase on the March city ballot. But former Mayor Richard Riordan has countered by launching a ballot measure drive aimed at reducing the city's pension obligations.

It's similar in thrust to what voters in San Diego and San Jose, the two next-largest cities, approved this year, and as happened in those cities, municipal unions are gearing up for political war.

As Riordan's campaign collects signatures, the unions are launching pre-emptive attacks on him and any group contemplating support for his measure.

The public employee pension reform plan enacted by the Legislature and Gov. Jerry Brown this year was minimalism. They did just enough to say that they did something, believing that failure to do something about soaring pension costs would adversely affect Proposition 30, the tax increase measure that they wanted voters to enact.

Brown, et al., promised that it was merely a first step and that other reforms would follow, but with Proposition 30 now safely passed, the chances of any further state pension changes probably are scant.

In fact, while state pension costs have been increasing, they still represent a relatively small part of the state budget, because personnel costs are a relatively small part of the budget. Most of the state's money is given to others — schools, colleges and counties, particularly — to be spent.

Proportionately, rising pension costs hit city governments the hardest, because their budgets are primarily spent on employees, especially police and fire personnel, who have the highest pensions of any California public workers.

That's why the bankruptcy cases of two cities, Stockton and San Bernardino, have become major pension battlegrounds. Insurers of Stockton's bonds have demanded that the city's pensioners share the pain of any write-down in the city's debts, while San Bernardino has suspended its payments to the California Public Employees' Retirement System.

CalPERS is taking an aggressive legal posture in both cases to protect what it contends to be an inviolable obligation to finance pensions, regardless of what happens to other creditors, but whether federal bankruptcy law can trump state pension law is an unsettled legal question.

As those cases play out, another front in California's pension war has opened in the state's largest city, Los Angeles, which has serious budget problems stemming, in part, from its massive pension obligations — so serious, in fact, that some city officials have raised the specter of following Stockton and San Bernardino into bankruptcy court.

Facing a $216 million budget deficit next year, the Los Angeles City Council has voted to place a $215 million sales tax increase on the March city ballot. But former Mayor Richard Riordan has countered by launching a ballot measure drive aimed at reducing the city's pension obligations.

It's similar in thrust to what voters in San Diego and San Jose, the two next-largest cities, approved this year, and as happened in those cities, municipal unions are gearing up for political war.

As Riordan's campaign collects signatures, the unions are launching pre-emptive attacks on him and any group contemplating support for his measure.

What happens in Los Angeles may set the tone for what happens, or not, in the Capitol regarding pension costs.